Who's winning the game in the Indian pharma market?

Within the IPM, the chronic segment grew 12.5 percent on year while the acute segment expanded 10.6 percent in May.

Domestic-focused pharmaceutical companies have been at the heart of the changing sentiment for the sector thanks to the robust growth trend in the Indian pharma market (IPM). Unlike the US and Europe markets that are still some time away from staging a sustainable recovery, the Indian pharma market is firing on all cylinders.

Robust demand, significant volume growth, price hikes and a low base helped the IPM achieve a double-digit growth for the second consecutive month in May. The IPM registered a 10 percent on-year growth, which comes after the 11 percent increase seen in April.

The improving prospects of the IPM have also turned fortunes of drugmakers that have a strong presence in the domestic market. While the entire IPM is going through a growth cycle, not all segments are running at the same speed.

A clear reflection of that is when one looks at the growth trends of chronic and acute therapies-two of the major segments within the IPM. While acute therapies account for a higher share in the IPM, it is the chronic segment that is leading the race for growth.

Growth of chronic therapy

In May, the chronic segment grew 12.5 percent on-year while the acute segment expanded 10.6 percent. JM Financial also believes that the focus will now be on chronic therapies to deliver healthy double-digit growth.

Backing the view, Shrikant Akolkar, Vice President - Institutional Equities Research at Asian Markets Securities also believes the growth in chronic therapies will outpace that of acute therapies and companies with a higher exposure to the former will benefit the most out of this upcycle.

"Chronic therapies are likely to outperform the IPM growth while acute therapies are still facing some pressure," Akolkar said. He also attributed subdued demand for antibiotics due to a late monsoon, and higher prices of penicillin as key factors behind the pressure on acute therapies.

There has also been an uptick in heart-related problems, especially after COVID, which is also lifting demand for chronic therapies, another analyst pointed out.

What analysts are saying

Accordingly, most analysts are of the view that companies with a higher reliance on chronic therapies in the domestic market are likely to show stronger growth outperformance against their domestic peers.

Most analysts also picked Torrent Pharma and JB Chemicals and Pharmaceuticals as the key beneficiaries of this trend due to their higher presence in the segment. On the flipside, Alkem Laboratories, a drugmaker with a large presence in the acute therapies segment, is likely to lag behind.

A look at the stock performance of these drugmakers also supports the view. While Torrent Pharma and JB Chemicals have each gained 22.24 percent in the past three months, Alkem's rise during the same period has been limited to 8.63 percent.

In conclusion, companies within the chronic therapies segment in the domestic market are better placed to give outsized returns within the entire the pharma pack at the current juncture.